Do you remember where you were at in your life the last time the bottom fell out of the economy?

It’s been about a decade since the Great Recession and a new report from Moody’s Analytics shows Pennsylvania is one of at least 15 states that are “substantially underprepared” for the next economic downturn, writes Lindsay Lazarski for WHYY and the Philadelphia Business Journal. 

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After the financial crisis in 2008, the Federal Reserve required the nation’s largest banks to undergo a “stress test” evaluating whether they could survive an economic shock. Moody’s Analytics applied the same concept to states’ budgets and economies.

Pennsylvania failed its stress test.

Moody’s found the state would need to reserve about 7 percent of general fund revenues each year to absorb the effects of a moderate recession without having to cut spending or raise taxes.

That gap is less than the average of 10.5 percent because of Pennsylvania’s stable tax structure compared to most states. But in terms of filling that hole, the report found Pennsylvania has no appreciable reserves and is actually down 1.8 percent. Only two other states, Arkansas and New Mexico, are like Pennsylvania and have no actual reserves for their rainy day funds.

Go to whyy.org for what this means for the average Pennsylvanian.

To read the complete story click here.

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